One typo / error I found with question 3 --- in the question itself it says that there are $10 worth of synergies, but when you add up the EBIT + Synergies in the answer you add $100 instead of 10. Besides that it was a very good video.
Hello FinanceKid, Can you check your Pro-Forma EBIT formula @19:15 ... Shouldn't it be 1,000 (comp. A) + 500 (comp. B) + 10 (synergies you state as 10 not 100) = 1,510 ??? Also, @18:51 you are multiplying the exchange ratio to seller shares outstanding while your explanation around @11:20 you are multiplying the exchange ratio to the acquirers shares outstanding. (Acquirer has 100 shares so new shares should be 10 (= 100 * 0.1). Please let me know if I am missing something!!
Hi Vicente, Thanks for pointing out the mistake @19:15 I checked my notes and synergies should have been $100 not $10 for the question so I will make a note of that. With regards to the second point, I am not sure where I suggested multiplying the exchange ratio by the acquirer's shares. The explanation @11:20 might seem confusing because both companies have one share outstanding. However, when calculating the number of new shares issued, you would need to multiply the ratio by the seller shares outstanding because the ratio indicates how many acquirer shares are excahnged for one seller share. That is what is done @18:51 and @11:20 Please let me know if that cleared up your concerns.
![Financial Modeling Quick Lessons: Accretion / Dilution (Part 1) [UPDATED]](/img/n.gif)
One typo / error I found with question 3 --- in the question itself it says that there are $10 worth of synergies, but when you add up the EBIT + Synergies in the answer you add $100 instead of 10. Besides that it was a very good video.
Proforma EBIT = (1,000 + 500 + 10) = $1,510
EBT = 1,510 - 55 = $1,455
Proforma NI = 1,455 * 50% = $727.50
Proforma EPS = 727.50 / 101 = $7.20
Thank you for this! 🙏 I like your personality for some reason 🙊
This video is really great!
Great video. Really well explained!
Hello FinanceKid,
Can you check your Pro-Forma EBIT formula @19:15 ... Shouldn't it be 1,000 (comp. A) + 500 (comp. B) + 10 (synergies you state as 10 not 100) = 1,510 ???
Also, @18:51 you are multiplying the exchange ratio to seller shares outstanding while your explanation around @11:20 you are multiplying the exchange ratio to the acquirers shares outstanding. (Acquirer has 100 shares so new shares should be 10 (= 100 * 0.1).
Please let me know if I am missing something!!
Hi Vicente, Thanks for pointing out the mistake @19:15 I checked my notes and synergies should have been $100 not $10 for the question so I will make a note of that.
With regards to the second point, I am not sure where I suggested multiplying the exchange ratio by the acquirer's shares. The explanation @11:20 might seem confusing because both companies have one share outstanding. However, when calculating the number of new shares issued, you would need to multiply the ratio by the seller shares outstanding because the ratio indicates how many acquirer shares are excahnged for one seller share. That is what is done @18:51 and @11:20
Please let me know if that cleared up your concerns.
Where did the $100 (1000+500+100) come from if synergy is $10?
Is it synergy x target share value?
How would you make this for private to private transactions?
Love you